When I insert the disk, it reads it, then ejects the disk. If I try to click on Drive E:\ (The disk drive) it gives me a loading screen, spits out the disk, then displays a blank drive.
Bear in mind for what you are doing although well meaning does not make it legal as to use an upgrade disk you must first have a legal copy of XP (hence the reduced price of the upgrade).
I wonder if this is happening because it is detecting your XP copy isn't validating.
Do you get any error messages? I would really have expected there to be one with this set of circumstances.